In 2010, Yum the American parent company of KFC brand expect 36% of their global $2 billion operating profit from their 3700 restaurants in China. Along with their most dominant brand KFC’s 3200 stores, Pizza Hut China’s 500 stores will eclipse the total earnings of all 19,000 Taco Bell, Pizza Hut, Long John Silvers, KFC and A&W restaurants in the US. “Yum has become the most successful foreign company in China,” says James McGregor, author of “One Billion Customers: Lessons from the Front Lines of Doing Business in China.” Yum is now in 650 cities in China and a 40% market share outstripping competitors like McDonalds 16%.
Yum opened their first restaurant in China in 1987. And although they have 3,700 today, Yum’s business plan is to reach 20,000 one day.
This reversal isn’t just happening in the world of fast food. If you talk to some of the most successful US-based associations who own leading certification products in their profession or industrial sector, you will find that their businesses outside the US are larger and faster growing than in the US.
How do American enterprises succeed in China or for that matter anywhere outside their home market? Here is the secret recipe from the Kentucky Colonel.
- Offer a menu that local consumers want to eat – If you go to a KFC in China, you will see the typical fare but the menu offers local items that are very popular with local Chinese: “Would you like pork or pickles with your bowl of Congee?” Or you can order a Dragon Twist (chicken wrapped in duck sauce) or spicy tofu chicken. In fact the menu is dominated by Chinese-styled KFC options rather than McDonald’s ubiquitous burger menu.
- Create customer experiences that are locally relevant – Americans wouldn’t recognize a Pizza Hut in China. They have been designed as sophisticated restaurants for the increasingly affluent and status conscious Chinese. Here you have over 100 menu items from which to choose that include wine and other high-end dishes.
- Hire local managers with the competencies and entrepreneurial drive to succeed – Crucial to Yum’s success has been local teams of managers who know the local scene and can build the partnerships upon which expansion rests and to research, design and deliver the local menus and restaurant experiences that its customers crave.
- Seek out the best partners who can create robust channels for your products and services – Yum found a collection of early state owned enterprise partners like the Beijing Corporation of Animal Production, Processing, Industry and Commerce as well as (wait for it)…. Beijing Travel & Tourism. Bet you would never have thought to combine these two.
American associations are in danger of letting the opportunities for international growth by pass them, because they do not have the proper local market intelligence nor understand the unique needs of the various customer segments they hope to attract to their products, services or membership. Further, they do not seem to be willing to adapt their value proposition and product portfolio to local market dictates, and seem unable to focus proper resources to adapt these products to local markets and promote, sell and service them with good local partner channels.
These ingredients of success isn’t just a KFC recipe. It is being applied by other organizations around the world. It is time for US associations to embrace a similar approach now especially as more and more are finding that their education, conference and publishing products are finding larger audiences outside the US. The challenge as we presented in an earlier article here on GG is that you can increase market share and product sales only if you have proper market intel, aligned product relevance, and a local means to deliver, market, sell and service.
Please consider joining ASAE and MCI on our return trip to China this year for the upcoming study mission. See this link for details.